Lesson # 36 : The Jigsaw called Opportunity

It's one of those hot days in Gurgoan. At one of the many DLF buildings the employees of various multi nationals are about to take their daily break. The only difference is that they won't be headed towards their Office cafeteria instead they are going to go to the ground floor walk out of their building and go to the local and only chaiwala* in the vicinity.

Why you would ask?

For the simple reason that this local chaiwala who is catering to the big and small and is providing good clean tea is going to provide it for barely 20 rupees. Operating in what someone would barely call space. This chaiwala is making money to the tune of 25 to 30 thousand in a single day.

How you would ask?

It's pretty simple. The office cafeteria's offer anything for around 50 to 100 bucks. Food is even more expensive. The chaiwala is offering the same thing with the same amount of hygiene and probably a better taste for 20 bucks. Which is half the price. Now he doesn't simply sell tea. This guy retails maggi and he retails it for 50 bucks a plate. Profits anyone? The menu items vary from the big to the small. Sandwiches going for 50 to 80 bucks and cold coffee costing anywhere between 45 to 60 bucks.

So why exactly would anyone go there?

Again people tired with their office like to chill out. So they walk down to the ground floor get some fresh air smoke a cigarette or two. Chat with the people around. Have a little walk and are all good and ready to go. Their mental state is much better and they feel they have saved onto a lot of money.

So what's the point of all of this?

It's like this. This dude {He doesn't wish to be named the chai wala} was basically at the right time and at the right place. His overheads are minimal as he doesn't need to pay rent. He pays roughly 10000 a month to the cops which is meagre compared to what he makes. People from nearby buildings don't mind visiting him.

The basic idea is that he was at the right place and at the right time. So basically when an opportunity presents itself you need to be able to take that leap at the right point of time. In the greater scheme of things maybe you are that dude/dudette who is missing from that big jigsaw puzzle!!

*chaiwala = tea seller

- Doodle

Lesson # 35 : Is the clothing space getting overcrowded?

The past week sitting idle at home and waiting for college to start a greater part of my day is spent on the internet and in particular facebook. So surfing the web I glanced upon not one, not two but hundreds of new start ups, online retailers and other stores which are selling clothing.

And the question which popped into my head was that is this space getting overcrowded?

Would the clothing segment like other segments such as retail, banking, automobile get crowded? Would margins of all these companies fall? And would the market be converted into such that no individual seller would be able to make monumental profits in the long run or would the smaller brands faced with extinction simply phase out?

Well here goes nothing. The first thing I found was that retailers. The big brands be it A nike, an Adidas or A Puma are really sweating it out to clear stocks. Adidas has a bigger problem in India thanks to the Reebok scandal. But with sales on all brands with flat 50% off and stores still not as crowded as they used to be it makes me wonder is the world all right? Or have people just gotten smarter or have they just gotten poorer.

Surprisingly there was one store which was so overcrowded that I felt claustrophobic inside that store. It's Inditex's Zara which clearly sizzles out the competition from it's opponents. Somehow people just can't get enough of Zara. And while other stores give flat 50% off Zara's discounts vary from 10 to 35%. And with stock clearing out on a daily basis it's clear that Zara will survive.

But what about the smaller brands. The not so favoured. How would a premium seller such as Color Plus survive? Or how would Marks and spencer who have some of the largest stores in the country survive?

Couple this with consumers slowly shifting to buying clothes and shoes online where there are year long discounts it seems that while the clothing sector may be getting overcrowded it's not dying out. One's loss is another one's gain. So someone is making a sale at the end of the day and earning a hefty profit on it as well. With newer sites such as Jabong, Myntra and others coming up it seems that the concept of a retail store in itself is becoming redundant

Then there's the whole story of the startups. Who with virtually non existential capital are creating holes in the sales of the larger brands. For instance Xtees, T Go, Almater and others are coming up with T-shirts that don't just look great but are way cheaper than the competition. Quality is a whole different ball game. But a Johnny Bravo or Simpsons T shirt for barely 400 bucks is a pretty good deal. At the same time this creates a huge dent in the sales of larger brands. Puma's T-shirts in sale start at around 700 a piece which is nearly twice the cost.

Somehow anyone who wants to start a new business feels that Clothing is the way to go. But clearly it isn't. Imagine the entire market as a huge ocean with a variety of fish some eating grass others eating smaller fish. Now imagine everyone starts eating grass. No one wants to eat other fish. The number of fishes will increase and subsequently the ocean becomes to small for all of them to survive.

The point is that with the bigger conglomerates such as Reliance who started retailing Steve Madden in India and others getting onto the band wagon called Clothing it's only going to get overcrowded. The small will
either stop manufacturing or be absorbed by the larger firms.

Another problem is that if Venture Capitalists start pumping in money like crazy the sector may just develop a huge bubble. With LVMH investing in India there's a huge danger of that. They have deep pockets and wouldn't mind losing a few million. There last investment was in Fab India in May. The future looks like a two way street for the clothing sector and it can go either ways!!

On behalf of Doodle inc
- Udit Sabharwal

Lesson # 34 : Dear Nick you will be fondly remembered...

It was an age of the great and powerful. Warner Brothers had a foothold in India which no one could shake. Cartoon Network was the shit. With programming attracting ad revenue from the big and small. Tie ups with comic brands, cloth manufacturers and god knows what. Cartoon Network was here and it was here to stay.

But as I flipped through the channels one evening all of a sudden I discovered this huge blot on my tv set. It wasn't any blot it was a freaking orange blot and I stayed glued. I stayed glued to my tv set till my bed time that day. Cartoon Network seemed like shit then.

The programmes on Nickelodeon were some of the best. With cartoons ranging from Rugrats to Chalk zone to The Fairly Odd Parents to Hey Arnold to Rocket Power these were shows that brought you to a whole new world.

And then there was the live programming with stuff like Drake and Josh, Global Guts, Legends of the Hidden Temple, Double dare 2000, Kenan and Kel, All that, The Amanda Show, Cousin Skeeter. Basically stuff that would drive you crazy.

Kenan and Kel the show that made us fall in love with orange soda

And apart from this there was the annual Nickelodeon Teen awards broadcast simultaneously from the USA.

Couple this with minimal advertisements and a 24 hour entertainment channel. Yes this was around the same time that Cartoon Network had started 24 hours of programming but most of it was repeat or old telecasts.

Nick seemed to be headed towards becoming the market leader.

But for one fatal incident. That was Viacom separating into a separate entity in 2007. When Viacom India was established.

It dismantled everything that Nick stood for one piece at a time. First converting Nick into an 24 hour Hindi channel. Limiting programming and repeating the same season month after month. Then they did something even more stupid. They went about buying cheaper Japanese cartoons like Ninja Hattori and began broadcasting them in Hindi like crazy. Nick came to be associated with not Spongebob or the Orange that it had stood for but with a crazy eyed blue ninja.

Then all of a sudden all of the original nick programming stopped. Everything from Rugrats to Spongebob was done away with. Spongebob airs occasionally sometimes at 3 in the night.

None of the movies that Nick produces are aired in India neither are the newer television shows or teenage shows.

iCarly one of Nick's most famous shows in the US 

Nick has restarted with English as a language but it sucks more often than not. Who the hell want's to watch Hattori in english anyways? The dude's a retard.


Today Nick loses out to WB once again as Pogo and Cartoon Network have overtaken them. Viacom came up with a new channel called Sonic. It's even worse. The older generation has shifted onto animax the younger to Disney and Cartoon Network. Viacom you are killing  yourself and you are killing us.


In short and these words may come across as rather strongly and if Viacom you are listening

NICKELODEON YOU SUCK

- Doodle

Lesson # 33 : Can Mr. Mallya save his dying Bird?

Mr. Mallya when Kingfisher was the king of good times

Having read a fabulous article in Forbes this week it really got me thinking. Can Kingfisher airlines officially the country's smallest air carrier survive. With both it's wings cut and capital in shortfall coupled with the tremendous pressure from it's investors and lenders can this bird sail through the wild storm it's gotten itself into or it will it just end up a dead bird like that albatross in rhyme of the ancient mariner.

So what's the problem? Well no one sums it up better than Forbes. Click here for the link But here's just a summary

Problem # 1 : There are debts of over 7000 crore to various lenders from National to private banks to various airport authorities across the country to other private investors who want their money back and they want it now.

Problem # 2 : Kingfisher still has over 4500 employees who they cannot fire at this point of time as they will have to compensate them which they cannot afford. Moreover none of these employees can quit because they still need to be paid six months dues and leaving the job will affect their pension funds.

Problem # 3: If Kingfisher sells all it's assets, If Vijay Mallya sells all his assets, If Siddharth Mallya sells all his assets they still can't repay the debt.

Problem # 4 : FDI in aviation for which Mallya has been lobbying isn't been given a green signal for the simple reason that other aviation companies feel that the sick players in the market should be allowed to die if they cannot afford the medicine.

Problem # 5 : No other aviation company has the required effort or money to invest in Kingfisher. The one's that do such as GoAir and Emirates wish to steer away from this sick and nearly dead bird.

So how should Mallya the King of Good Times set his boat sailing again?

The simple answer would be to cut costs. But Kingfisher has already done that significantly. The fact of the matter is that a greater number of employees are a burden to the company. So cutting costs of employees and any other  unused employee would be beneficial. This would mean paying significant amounts but over the course of the next five to ten years the rewards would be enormous. Kingfisher can start a new policy whereby it would lay off employees right now paying their dues and other benefits the ones it can afford and offer it's employees the chance to join the firm back when it re expands it's operations in the near future for the same benefits and the same salary.

Once this cost cutting measure has been undertaken then Kingfisher should get it's planes running. A lot of them need immediate maintenance which Mr. Mallya has ignored for long. Assuming that a greater amount of the fleet is operational Kingfisher should choose to either sell a part of its fleet to pay back it's lenders and keep just a fleet of let's say seven planes initially. Once the capital from the planes comes in it should be used to pay back lenders or the company can also choose to buy back it's shares from the public. The latter being a big gamble which may off in the long run. Once the planes are operational Kingfisher should follow the Go air model of keeping it Simple. The company should operate low cost flights to highly dense cities nationally. It should cease international operations on the whole. Using it's planes it should start flights which need to be at a discounted rate of 10-15% from competitors. These flights should be operational from Delhi to Mumbai or other cities which see dense frequent flyers.

At the same time Kingfisher should also start with cargo services from Delhi to Mumbai or other flights offering air cargo at cheaper rates than competitors. Or it should simply team up with other logistic companies and offer them cheaper air cargo or simply better deals than competitors.

Apart from this Kingfisher should use it's planes for private charter pricing it similarly below the average market rate but at the same time not letting go of providing the world class service.

Once Kingfisher starts to churn out and atleast generate suitable revenue and pay it's employees that is it starts to break even the bird is ready to fly.

Obviously a large number of these propositions seem preposterous and mad on the first read. But it's so crazy that it just might work. And besides what has Kingfisher to lose? Hasn't it lost enough already?

Perhaps one day the bird shall fly again!!

And there's this song perhaps Mr. Mallya would be singing this right now. Click here

-Doodle

Lesson # 32 : Are we really as rich as we think ourselves to be?

Sitting in a world class mall in the capital of India and watching crowds of shoppers max out their credit cards it suddenly hit me. That do these people really have the money to buy the stuff that they are buying. With bills running upto ten grand and starting at anywhere between one to two grand it just seemed so unreal.

One after the other shoppers pulling out credit and debit cards and then using it to buy merchandise which clearly they couldn't afford. So why this great misconception? Well it all starts out with the credit card companies who troll all of us at some point in our lives.

With cash as an easy disposable it is bound to be misused. With great power comes great responsibility spiderman taught us that. Actually Jefferson did but nobody credits him with it. Coming back whenever a person buys a thing - let's say a sweatshirt. A Tommy Hilfiger sweatshirt for instance and he pays for it using his credit card. But he simply does not have the money to afford it. Assuming he has let's say three grand in his wallet. And he has let's say  a lakh to two lakhs in saving he still can't afford it. Here's why.

 Assuming this dude makes fifty thousand a month. Which today is the average package most undergraduate students get. And he pays say ten grand as rent. And another five on phone and travel expenses. Five on groceries and food. He has health insurance and other insurances which run upto another five to eight grand. And then he needs to pay for water and electricity which at 6 to 7 rupees a unit is pricey if anything et al. And then this dude also needs to pay tax. So he saves what probably five otherwise six in a good month. And mind you that's when he's having a good month. And then he decides one fine day to buy a sweatshirt for three grand. Yes there goes his saving down the drain.

But our good friend has yet to realize the power of the credit card. He has three grand in his pocket. But he refuses to use those. Instead he uses his credit card hoping that by the end of the month he will not only have those three grand but another three grand and the not so large interest that he needs to pay. Sadly neither happens and that's where our good friend starts defaulting. But he continues to swipe month after month year after year card after card. And then he defaults. And he defaults big.

Now imagine not just this dude but every single dude and dudette who lack the knowledge about their misdoings doing it one after the other generation after generation and you have a debt crises. One which will be fuelled by the masses and whose weight we as individuals whether culprits in it or not will have to bear.

So come one come all for our default warrants are being signed one after the other. For someone somewhere is swiping his card. Hell you could be the one doing it. Think twice that's all I can say!!

-Doodle

Lesson # 31 : Why Warren Buffet loves Coke!!

We have heard it over the years and seen it in his stock picks over the years too. His reasoning has been rather simple when it comes to buying Coca -Cola's stock but the fact of the matter is that are we sure that Warren Buffet's really buying coke for that very reason?

Warren Buffet's romanticism with coca cola starts way back in 1988 when the company stock traded at a discount which ranged from 24% to 41% with the share price ranging from anywhere between 35$ to 45$. Everyone at Wall Street was of the opinion that Coke trading at an annual growth rate of 18% was bound to fall and that eventually the stock price would break even and that would be the idle time to pick up the stock. However, Warren Buffet a hardcore fan of Benjamin Graham and an ardent follower of the Security Analysis methodology thought otherwise and took the stock rather rashly.

Why? It's because he thought the value on the books was just right. It was trading below the book value giving a better return than the benchmark index. Moreover, Buffet had seen and felt the product himself that he thought of it as an investment too big too fail. A fast food junkie Buffet has forever treasured a Cherry Coke and till date has a mini fridge in his office stocked with varieties of Coke.He had seen Coke do what it does best. Advertise and gather clientèle who weren't going anywhere in the near future. He had seen the tie ups that all the fast food chains had with coke and all the advertisements in the radio, the newspaper and on the television. He estimated the average cost that a coke would cost to produce coupled with the average cost for marketing a coke and estimated that the profits were enormous. The stock would rise eventually. And Buffet thought of Coke as an investment. 

When the stock started rising post his initial investments he continued to add it to his portfolio. Today Berkshire Hathaway is a major shareholder at Coke. And Coke in return is one of Berkshire Hathaway's biggest cash cows. 

Did Buffet make this decision out of sheer randomness or did he actually apply cold logic? 

The fact of the matter is that he did and to such an extent that it knows no control. Because Buffet had seen the rapo that Coke held with the consumers. He had gone through the surveys where an American would always choose Coke over Pepsi or Rc Cola and at the same time he had seen Coke's growth in the Asian and European countries. He saw that Coke could breeze through fall backs simply on the basis of it's other product line up and that coke did not want to steer clear from innovation. And the rest as they say is history.

And for the record Buffet put in 1.07 billion when he started buying Coke. The dudes at wallstreet thought he was crazy. Crazy he was cause three weeks down his Coke stock was more than the entire value of Berkshire Hathaway's assets back then!!

-Doodle